Branson Becomes Face of U.K. Health Flap

By

Jeanne Whalen

Dec. 26, 2012 4:08 p.m. ET

LONDON— Richard Branson built a fortune stamping his irreverent Virgin brand on everything from airplanes to rock 'n' roll records. But the billionaire entrepreneur is taking heat for putting the Virgin label on one thing many Britons don't want branded: their taxpayer-funded health-care system.

The Virgin Care unit of Mr. Branson's Virgin Group has spent the past 2½ years supplying health-care services like podiatry and dermatology to the National Health Service, which is increasingly turning to private-sector contractors in a bid to save money and improve service.

Jacky Davis, an NHS radiologist who helped organize one of the protests, said medical care "is uniquely unsuited to the commercial market."

"Multinationals make their profits by driving down the working conditions of their employees and by cutting back on services," she said. "In both cases patients are the losers."

ENLARGE

Virgin says parts of the NHS are so inefficient that there is plenty of room to improve service and make a profit too. "We all know that the NHS can provide fantastic services a lot of the time, but on occasion they can also be improved," said Bart Johnson, Virgin Care's chief executive. He said Virgin aims to provide "better service for patients, more convenient service for patients and a good deal for the taxpayer as well."

In September, a woman in the western county of Devon went to court to try to stop Virgin from winning a deal to provide children's health services in her region, arguing that the NHS and local authorities didn't follow their own rules in awarding the contract. The court agreed that the process didn't comply with the law, but let the contract stand because Devon urgently needed a contractor to take on the job.

Mr. Johnson declined to disclose what sort of profit margins Virgin is targeting in health care, but said there was a "complete correlation between high-quality service and robust financial return."

Like most Western countries, Britain is grappling with soaring health-care costs and a yawning budget deficit, forcing the NHS to find ways to cut costs. The previous Labour government began outsourcing some health-care services to private companies in the mid-2000s in what it described as an attempt to save money and improve services.

The process has accelerated under the current Conservative-led government, which this year passed legislation opening the door wider to the private sector. The NHS said private-sector contractors performed 4.3% of the elective hospital procedures it provided in fiscal 2012.

Britain's efforts to boost the private sector's role in providing health care is in partial contrast to the U.S., where the Obama administration's health law increases the state's role in paying for and regulating health care.

In March, Virgin won one of the biggest NHS contracts awarded so far: a five-year, £500 million ($806 million) deal to provide "community health services" in the county of Surrey, near London.

The contract includes the running of seven nonacute hospitals, which perform minor surgeries and other non-urgent care, and providing services ranging from diabetes treatment and physical therapy to screening for breast cancer and sexually transmitted diseases. Under the deal, 2,500 local NHS employees were transferred to Virgin's payroll.

The company, which beat two nonprofit groups for the contract, immediately drew fire. The opposition Labour Party and some newspapers accused Surrey's Conservative member of parliament of lobbying on Virgin's behalf. The MP and the company both denied the allegations.

In May, two months after Virgin signed the Surrey deal, a health-care regulator inspected one of the Virgin-run hospitals and found "evidence that some patients were being left in soiled conditions for too long." Labour activist and blogger Eoin Clarke published a link to the report and proclaimed that Virgin was falling down on the job.

Virgin said its own probe showed that the incident involved just one patient and apparently occurred when a call button wasn't answered quickly enough during a shift change. A Virgin spokesman said the company has remedied the problem by making sure there is enough employee overlap when shifts change. Virgin's Mr. Johnson said the regulator otherwise gave the company a clean bill of health.

Not all of the reaction has been negative. Surrey Link, a nonprofit local health-care watchdog, says Virgin has taken action "whenever we have highlighted where improvements to services must be made." For example, the company has made repairs to buildings that "had not been invested in for a long time," Surrey Link said in a statement.

Virgin says it also has extended the hours its facilities are open on evenings and weekends and is offering walk-in appointments, which can be hard to get from the NHS.

At most Virgin offices patients are encouraged to rank the service on a 1-to-10 scale; a spokesman said 81% of respondents give it a 9 or 10.

One of the groups that lost the bidding for the Surrey contract—Central Surrey Health, a nonprofit group owned by 700 nurses and health-care workers—says it doesn't understand how Virgin can make much profit on the deal, particularly as the NHS has grown more frugal about payments for service.

"I'm interested in the model of how they're going to be able to make that work," said Rebecca Jones, a spokeswoman for the group.

Central Surrey Health is working on other NHS contracts in the county and averages a 1% return on sales before interest and taxes, which it reinvests in its operations, she said.

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